TOKYO, Jan. 26, 2026 —The Japanese yen climbed to its strongest level in more than two months on Monday as traders adjusted positions amid growing attention from government officials in Tokyo and the United States. The currency strengthened as much as 1.5 percent to 153.30 per dollar before easing slightly, marking a sharp reversal from recent weakness and prompting renewed focus on official scrutiny of foreign exchange markets.

The move followed comments from Japan’s Prime Minister Sanae Takaichi, who said the government would take necessary steps to address speculative activity in currency trading. Those remarks, paired with signs of engagement from U.S. authorities, led traders to reassess short yen positions, triggering a broad unwind that lifted the currency during both Asian and U.S. trading sessions.

U.S. Involvement Draws Market Attention

Attention sharpened after sources said the New York Federal Reserve contacted dealers to check dollar yen exchange rates late last week. Such inquiries are often interpreted by traders as an indication that authorities are closely watching market conditions, even when no immediate follow up occurs. The checks helped accelerate the yen’s advance, pushing it more than three percent higher from Friday’s lows.

Dominic Bunning, head of G10 foreign exchange strategy at Nomura, said joint scrutiny from the Japanese Ministry of Finance and the U.S. Treasury carries greater weight with traders than unilateral steps by Japan. Japanese Finance Minister Satsuki Katayama declined to comment on the rate checks, while currency diplomat Atsushi Mimura said Japan would maintain close coordination with the United States and respond as needed.

The United States last joined Japan in selling yen in 2011 after the Fukushima earthquake, making any indication of renewed coordination a significant factor for traders adjusting exposure.

Debt Concerns and Political Backdrop

Public Finances Under Market Scrutiny: The yen’s advance comes against a backdrop of concern over Japan’s public finances, with government debt exceeding twice the size of the economy. Recent shifts in global borrowing costs have sharpened investor focus on how Japan manages its fiscal position, particularly as market yields fluctuate and currency volatility intensifies.

Traders said these concerns add sensitivity to foreign exchange movements, as currency weakness can amplify worries about funding costs and capital flows. The yen’s recent strength has offered temporary relief, though investors remain cautious given the scale of outstanding debt and the policy constraints facing authorities.

Election Campaign Adds Political Layer: Political developments have added another layer of attention, with Prime Minister Takaichi campaigning ahead of a snap election scheduled for February 8. She has outlined plans to cut taxes, a stance that has drawn interest from investors assessing fiscal direction alongside currency movements.

Despite the yen’s sharp gains, Bank of Japan money market data indicated that the move did not reflect direct action by Japanese authorities. On Friday, the yen recorded its largest one-day gain against the dollar in nearly six months, with sharp swings seen in both Asian and New York sessions, underscoring how rapidly positioning can shift when official comments intersect with political timing.

Dollar Weakens as Effects Spread

The yen’s strength coincided with broader weakness in the U.S. dollar, which slipped against a basket of major currencies. The dollar index fell 0.1 percent to a four-month low as traders reassessed exposure ahead of a Federal Reserve meeting later this week.

The euro touched a four-month high, while the British pound and Australian dollar also moved higher. The euro traded near $1.1854, sterling hovered around $1.3659, and the Australian dollar reached its strongest level since September. Marc Chandler, Chief Market Strategist at Bannock, said the yen’s move prompted wider dollar selling, highlighting how currency shifts can spill across markets.

Markets Watch Next Steps

While no formal action has been confirmed, the yen’s move shows how expectations alone can drive sharp adjustments. Traders continue to monitor statements from Tokyo and Washington closely, aware that official attention can influence behavior even without direct involvement.

As the Federal Reserve meeting approaches, investors are weighing economic data alongside political and policy developments on both sides of the Pacific. The yen’s climb to a two month high reflects that tension, showing how anticipation of government involvement can reshape positioning well before any concrete measures are taken.